CCRIF: improving climate resilience in the Caribbean
New innovative insurance will help eight island nations speed up recovery in case of extreme rainfall.
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The resiliency of the Caribbean islands was tested in December 2013, when St. Lucia, St. Vincent and the Grenadines, and Dominica were ravaged by a torrential rainstorm, leaving several people dead, and causing massive damage to roads, infrastructure buildings and property. This disaster was another demonstration that the Caribbean Catastrophe Risk Insurance Facility (CCRIF) needed to extend excess rainfall protection to their members.
In June 2014, USD 35 million of excess rainfall protection was added to the CCRIF existing insurance cover. CCRIF and Swiss Re worked together to develop the product.
This innovative insurance product has been in development since 2012, and this year the product was offered to all 16 CCRIF members with half of its members purchasing coverage.
Building resilience with risk transfer
Martyn Parker, Chairman Global Partnerships highlighted a recent climate study by CCRIF on the Caribbean region, which estimates annual losses from wind, storm surge and inland flooding to be as much as 6% of GDP in some countries. The study went on to say that climate change has the potential to greatly exacerbate these risks, and could increase expected losses by 1 to 3 percentage points of GDP by 2030.
On top of that, he cited another report by rating agency Standard & Poor's which recently warned that climate change might come to affect the creditworthiness of poorer and lower rated sovereigns. "Risk transfer solutions, like this excess rainfall coverage, can help demonstrate to rating agencies that sovereigns are well-equipped to respond to the fiscal burdens of natural disasters."
Shifting the focus
Nikhil da Victoria Lobo, Head Global Partnerships Americas explained, "That is why Swiss Re is encouraging governments and regional officials in risk-exposed parts of the world to move from post-disaster response mode, to pre-disaster risk management planning.
"By transferring a portion of the risk to the international reinsurance and capital markets, a country can offload a portion of the risk on more shoulders, increasing the pool of solidarity. In case disaster strikes, fresh capital swiftly flows into the affected country, supporting relief and reconstruction and reducing the strain on budget and fiscal stability," da Victoria Lobo said.
Juerg Trueb, Head Environmental & Commodity Markets for Corporate Solutions commented, "I'm very excited by this new product being added to the existing CCRIF programme for earthquakes and hurricanes. It builds on satellite technology to estimate the amount of rainfall, ensuring quick payment to affected countries.
"While the USD 36 million cover is relatively modest in terms of size, excessive rainfall insurance has great potential. Requested by regional authorities, it has been many years in the making, and opens new doors in terms of scaling and replication allowing more places around the world to benefit."
CCRIF CEO Isaac Anthony reiterated the importance of the new product. “The new excess rainfall product has been eagerly awaited by Caribbean governments as we all realize that considerable damage in the region is caused by rainfall and flooding.
"This product complements CCRIF’s hurricane coverage which determines losses based on wind and storm surge. We commend our eight members for taking the initiative and purchasing this ground-breaking product and hope that other countries in the region will follow.”
Published 6 August, 2014